Introduction to the Stock Market The Basics of Stock Investing

Holding Period The longer the holding period----the more risk you should take Stocks are a long term investment –minimum 5-year holding period A diversified portfolio should own at least 15 different stocks –often stock indices are the best way to accomplish this

Key Stock Indices S&P 500 Index –Largest 500 companies by $ value Dow Jones –30 very large American companies Nasdaq –primarily technology stocks indices track the performance of a large # of stocks You can invest in indices through index funds

BULL or BEAR MARKET?..

Sectors of Stock Market Technology Transportation Retail Financials Energy Health Care Defense New Industries (looking to the future…) Industry Type

What is company worth? Company ACompany B

2 Goals of a Company 1) Maximize Profits (each year) 2) Grow Profits (over time) have the best stock performance Companies that grow PROFITS the fastest

Growth Rates P.E. ratios reflect GROWTH rate expectations The HIGHER the P.E. => the FASTER the market expects Profits to Grow

SP500 Average PE is 15 Today’s Stock market PE = 15

Yahoo for analysis